Nobody complains more about inflation than retirees. For those living on a low income where all their money goes to basic necessities that is understandable – even though SS is adjusted each year.
But for the majority, a planning failure is the real problem.
Inflation is always with us, sometimes as we know painfully so.
The 10 Highest Annual Inflation Rates in U.S. History
- 1917: 17.84%
- 1918: 17.28%
- 1920: 15.63%
- 1919: 15.24%
- 1947: 14.39%
- 1980: 13.55%
- 1979: 11.25%
- 1974: 11.06%
- 1942: 10.92%
- 1981: 10.34%
From Investopedia
An average rate of inflation can be calculated for each year:
- In 2023, the average rate of inflation was 4.1%.
- In 2022, the average rate of inflation was 8.0%.
- In 2021, the average rate of inflation was 4.7%.
- In 2020, the average rate of inflation was 1.2%.
Since I retired in 2010, my income has lost over 40% of buying power.
So, if you are thinking about retirement, what’s your plan to cope with inflation during retirement?
QUINNSCOMMENTARY 
Price changes ≠ inflation, let alone inflation for any one individual. We adjust our personal market basket of goods everytime we go to the store, gas station, etc.
The market basket for calculating CPI is 3 years old and population-wide. So, many Americans have inflation rates far in excess of and others far below the official change in prices.
LikeLike
Indeed. I am planning to retire in a little less than a year at 60 (I have my reasons) and while I believe I have saved and planned very well, inflation is still/always a concern. I will have a small pension that will be “mostly” inflation adjusted after the first couple of years. I am hoping to hold off on Social Security until 70, but will revisit if needed at full social security retirement age. My wife is already collecting. Those income sources should more than cover fixed expenses, so I should be OK.
It is the emergency and discretionary spending that is unknown. And, of course, inflation is personal depending on one’s expenditures. I have saved more than I think I need to cover the unexpected, but one never knows for sure. Hopefully the returns on my 401K and taxable retirement investments will keep up with inflation as they have historically. If not – and if it goes on for a very long period – I guess we are all in the same boat. I can plan well, but I can’t plan for an apocalypse.
LikeLike
Someone eligible for SS this year was born in 1962:
S&P 500 closed at 63 in 1962–2023 at 4,700–+76X
Dividend–cash paid out in 1962 $2.15—-last year $70.30 +33X
CPI ended 1962 at 30— closed in 2023 at 307—-+10X
$100,000 using 4% +3% withdrawal–start on 01/01/2000–blue chip fund we have had for decades and continue monthly investing:
Withdrawn thru 12/31/2023—-$129,812.00 Value—$208,544.00 4 bear markets/00 to ’23
S&P 500: same withdrawal 2000-2023 Value on 12/31/23—- $11,320
The rear view mirror is clear–the windshield is murky.
LikeLike
“Since I retired in 2010, my income has lost over 40% of buying power.”
I retired in 2009, and my Social Security benefits have increased by about 40%. My biggest expense, my mortgage, is still the same.
LikeLike
What about property taxes?
LikeLike
California. Prop 13. Maximum increase 2%/yr. Utilities are increasing though.
And I am saving less than before.
………..
A friend sold his home in Livermore* two years ago. Taxes went from $1,400 /yr. to over $15,000 for the new owner. Home bought in 70s for less than $20k, sold for $1.1 mil. 1,400 sq/ft house on 5,000 sq/ft lot. Built in 1943.
*Lawrence Livermore National Laboratory
LikeLike
Unfortunately they continue to rise every year. Mine have increased almost 12% in the last 3 years. Property tax and annual increases must be considered when calculating your retirement expenses.
LikeLike
My property taxes went from $9k (home purchase in 2019) to $14k (2023). that’s an increase in excess of 50%. I have always said, no problem, so long as I can choose to have the county buy my home for the value assessed for taxation. It isn’t a market price unless someone is willing to pay that amount, cash.
LikeLike